IP Law Daily No right to jury trial for attorney fees claim under Patent Act
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Thursday, August 10, 2017

No right to jury trial for attorney fees claim under Patent Act

By Peter Reap, J.D., LL.M.

The federal district court in Philadelphia did not err in awarding attorney fees to defendants Avid Radiopharmaceuticals and the Trustees of the University of Pennsylvania under §285 of the Patent Act, in a suit brought by AIA America, because: (1) there is no right to a jury trial for attorney fees under §285; (2) the district court did not err by making factual findings not foreclosed by the jury’s verdict; and (3) AIA was not deprived of due process, the U.S. Court of Appeals for the Federal Circuit has decided (AIA America, Inc. v. Avid Radiopharmaceuticals, August 10, 2017, Hughes, T.).

AIA America sued Avid Radiopharmaceuticals and the Trustees of the University of Pennsylvania (collectively, Avid) for the infringement of U.S. Patent Nos. 5,455,169 and 7,538,258. The patents are generally directed to research technologies stemming from the discovery of the "Swedish mutation," a genetic mutation that is associated with early-onset familial Alzheimer’s disease.

Avid, in response, alleged that AIA lacked standing to assert the ’169 and ’258 patents. According to Avid, Ronald Sexton, AIA’s founder, and Dr. Mullan, the purported sole inventor, orchestrated a scheme to appropriate for themselves inventions from Imperial College London and the University of South Florida (USF). AIA maintained that Dr. Mullan was properly named the sole inventor of the ’169 and ’258 patents and that Dr. Mullan’s employer, USF, waived any ownership rights in the patents.

The jury determined that USF did not knowingly and intentionally waive its ownership rights to the Swedish mutation, and it also found that Dr. Hardy was a co-inventor. Based on the jury verdict, the district court found that AIA lacked standing to assert the ’169 and ’258 patents, and thus entered judgment in favor of Avid. The court awarded attorney fees in the amount of $3,943,317.70 to Avid. AIA appealed the award of attorney fees, but not the amount awarded.

Right to jury trial. AIA argued that the Seventh Amendment requires a jury trial to decide the facts forming the basis to award attorney fees under §285 of the Patent Act. Specifically, it contended that when an award of attorney fees is based in part or in whole on a party’s state of mind, intent, or culpability, only a jury may decide those issues.

The Seventh Amendment preserves the right to a jury trial for "[s]uits at common law." The phrase "suits at common law" refers to suits in which only legal rights and remedies were at issue, as opposed to equitable rights and remedies, the court observed. A two-step inquiry determines whether a modern statutory cause of action involves only legal rights and remedies. First, the court must compare the statutory action to 18th-century actions brought in the courts of England prior to the merger of the courts of law and equity. Second, it must examine the remedy sought and determine whether it is legal or equitable in nature.

Turning to the first step, English courts for centuries have allowed claims for attorney fees in both the courts of law and equity. But when brought in the courts of law, judges, not juries, determined attorney fees. Therefore, since either a judge in the court of law or an equity court would determine attorney fees, this implied that attorney fees generally do not involve legal rights.

As to the second step, the nature of the remedy, the fact that the relief sought is monetary does not necessarily make the remedy legal, the court reasoned. In the context of attorney fees, when attorney fees are themselves part of the merits of an action, they are regarded as a legal remedy.

By contrast, when attorney fees are awarded pursuant to a statutory prevailing-party provision, they are regarded as an equitable remedy because they raise issues collateral to and separate from the decision on the merits. Since Avid sought fees as a prevailing party under 35 U.S.C. §285, the attorney fees in this action are properly characterized as an equitable remedy, the court held. Because both steps of the appropriate test reflected that requests for attorney fees under §285 are equitable and do not invoke the Seventh Amendment right to a jury trial, AIA’s right to a jury trial under the Seventh Amendment was not violated.

Factual findings. AIA next argued that the district court had erred by making factual findings on issues that were not considered by a jury. Federal Circuit precedent stands for the straight-forward proposition that, after a trial on legal issues, a court may not make findings contrary to or inconsistent with the resolution of any issues necessarily and actually decided by the jury, the court noted. Those precedents do not prevent a court, when deciding equitable issues, from making additional findings not precluded by the jury’s verdict, according to the court. Thus, the district court was not foreclosed from making additional findings about AIA’s state of mind, intent, and culpability, the appellate court ruled.

Due process. Finally, AIA argued that its due process was violated because the district court did not give AIA the opportunity to submit evidence regarding its intent, state of mind, or culpability. Contrary to AIA’s argument, the district court provided both parties the opportunity to fully brief the motion seeking attorney’s fees, and it allowed both parties to submit any additional evidence and affidavits. Accordingly, the district court did not deprive AIA of due process.

The case is No. 2016-2647.

Attorneys: Peter Buckley (Fox Rothschild, LLP) for AIA America Inc., f/k/a Alzheimer's Institute of America, Inc. Charles E. Lipsey (Finnegan, Henderson, Farabow, Garrett & Dunner, LLP) for Avid Radiopharmaceuticals.

Companies: AIA America Inc., f/k/a Alzheimer's Institute of America, Inc.; Avid Radiopharmaceuticals

MainStory: TopStory Patent FedCirNews

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